The Michigan Strategic Fund has approved up to $6 million for demolition of city-owned Joe Louis Arena.

The Michigan Economic Development Corp. today said the Michigan Strategic Fund has approved up to $6 million for the demolition of city-owned Joe Louis Arena, where the Detroit Red Wings have played since 1979.

The $6 million represents a quarter of the estimated $24 million the state expects any commercial redevelopment of the riverfront site to be worth, according to information released today by the MEDC.

The deal requires the Detroit Brownfield Redevelopment Authority to repay the $6 million from taxes it will collect from whatever is eventually built on the site, which falls in the authority’s taxing purview.

The Red Wings and the city are finalizing a new lease arrangement for the team to remain playing at Joe Louis while a new arena is built. The city council could vote as soon as Monday on the lease, which would be retroactive to 2010 (when the old lease expired) and extend to 2015, after which the hockey team would move into a $450 million arena to be built at Woodward and I-75.

Under the new lease, Olympia Development (the real estate arm of Wings owners Mike and Marian Ilitch’s business holdings) will pay the city $1 million annually for the team to play at JLA. Once the team moves out, the city won’t use JLA to compete with the new arena, under the proposed lease.

Olympia’s prior lease with the city for the Wings to play at city-owned Joe Louis Arena required it to pay a $252,000 annual use tax and $25,000 in monthly rent.

Detroit also collects a 10 percent ticket tax for Joe Louis events, a surcharge of 10 percent on concessions and 7 percent on suite sales.

Joe Louis, named for the heavyweight boxer who once called the city home, was built by Detroit for $30.3 million and financed with municipal bonds.

The team, then owned by Bruce Norris, signed a deal in 1979 to move into brand-new Joe Louis that season, leaving behind Olympia Stadium, its home since 1927. Norris also owned Olympia, which was demolished in 1987.

Olympia would operate the new 18,000-seat arena for 35 years, with 12 five-year renewal options. It will keep all revenues from the venue and pay $11.5 million annually toward retirement of the construction debt.

The arena will be owned by the Downtown Development Authority, which is a city agency staffed under a contract by the nonprofit Detroit Economic Growth Corp. The DEGC has been the primary lead on the new arena deal for the city.

The Michigan Strategic Fund in July approved the sale of $450 million in 30-year tax-exempt private activity bonds to pay for construction of the arena itself. Another $200 million is planned in private-sector investment around the arena, such as residential, office and retail space.

Property and school taxes captured already in the DDA’s district will repay $261.5 million (58 percent) of the building’s construction bonds, while Olympia would provide $188.4 million (42 percent), according to details provided by the state. The city approved expanding the DDA district to encompass the arena site.

The state reimburses the schools for the diverted money, the DDA has said.

The arena is expected to take 24 to 30 months to build.

The Michigan Strategic Fund is an autonomous board within the quasi-public MEDC and was created in 1984 to promote economic development. It has financed projects via bonds and owns others.

The Strategic Fund has the authority to sell a limited amount of tax-exempt private activity bonds, which typically have lower interest rates than other bonds, on behalf of private companies building projects for public benefit.

M-1 Rail loan

The MSF also approved a $10 million loan for the $137 million M-1 Rail streetcar project from the Michigan Business Development Program, the MEDC said.

Construction of the 3.3-mile grade-level rail loop on Woodward Avenue by the public-private M-1 effort is expected to begin this spring. Pre-construction work already is underway.

Few details about the purpose of the loan were provided by the state, other than to say the money is needed by M-1 as security for other monies.

“Without the performance-based loan, the Applicant could not obtain affordable financing against certain donor commitments to allow the project to move forward,” the MEDC said in a statement.

A message seeking additional detail was left for M-1 Rail’s outside public relations staff.

M-1 has said for years that its funding for construction of the rail line is a mixture of private and public money.

The $3 million commitments are for the display advertising rights to a station along the route. The Troy-based Kresge Foundation has pledged $35.1 million, part of which already has been spent, and it gave an additional $3 million as a “backstop” grant.

The Detroit DDA has earmarked $9 million for M-1. An additional $16 million is from federal New Market Tax Credits, which have to be reapplied for annually. Financing plans include a $22 million commercial loan.

The project remains in talks for a vendor for streetcars.

M-1’s plan is a mostly curbside-running, fixed-rail streetcar circulator system, co-mingled with traffic, with 11 stops between Grand Boulevard and Congress Street. It will run in the median at its north and south ends.

The system is expected to be in service in early 2016.

Other projects approved by the Strategic Fund board today:

A $718,000 incentive for Brass Aluminum Forging Enterprises LLC of Ferndale to renovate and expand its facilities. Read the full story here.

A $3.2 million performance-based grant for BorgWarner Inc. to expand its tech center near its headquarters in Auburn Hills. Read the full story here.